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INVESTMENT SECURITIES
 9 Months Ended
Sep. 30, 2014
Investments, Debt and Equity Securities [Abstract]  
INVESTMENT SECURITIES
INVESTMENT SECURITIES
Investment securities classified as current and long-term were as follows at September 30, 2014 and December 31, 2013, respectively:
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
 
(in millions)
September 30, 2014
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government
corporations and agencies:
 
 
 
 
 
 
 
U.S. Treasury and agency obligations
$
846

 
$
8

 
$
(2
)
 
$
852

Mortgage-backed securities
1,544

 
42

 
(17
)
 
1,569

Tax-exempt municipal securities
3,006

 
148

 
(3
)
 
3,151

Mortgage-backed securities:
 
 
 
 
 
 
 
Residential
18

 
—

 
—

 
18

Commercial
698

 
15

 
(17
)
 
696

Asset-backed securities
40

 
1

 
—

 
41

Corporate debt securities
3,431

 
289

 
(12
)
 
3,708

Total debt securities
$
9,583

 
$
503

 
$
(51
)
 
$
10,035

December 31, 2013
 
 
 
 
 
 
 
U.S. Treasury and other U.S. government
corporations and agencies:
 
 
 
 
 
 
 
U.S. Treasury and agency obligations
$
584

 
$
6

 
$
(6
)
 
$
584

Mortgage-backed securities
1,834

 
34

 
(48
)
 
1,820

Tax-exempt municipal securities
2,911

 
93

 
(33
)
 
2,971

Mortgage-backed securities:
 
 
 
 
 
 
 
Residential
22

 
—

 
—

 
22

Commercial
662

 
20

 
(9
)
 
673

Asset-backed securities
63

 
1

 
(1
)
 
63

Corporate debt securities
3,474

 
223

 
(30
)
 
3,667

Total debt securities
$
9,550

 
$
377

 
$
(127
)
 
$
9,800


Gross unrealized losses and fair values aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows at September 30, 2014 and December 31, 2013, respectively:
 
Less than 12 months
 
12 months or more
 
Total
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(in millions)
September 30, 2014
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S.
government corporations
and agencies:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
obligations
$
59

 
$
—

 
$
86

 
$
(2
)
 
$
145

 
$
(2
)
Mortgage-backed
securities
147

 
(1
)
 
475

 
(16
)
 
622

 
(17
)
Tax-exempt municipal
securities
136

 
—

 
136

 
(3
)
 
272

 
(3
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
1

 
—

 
4

 
—

 
5

 
—

Commercial
145

 
(3
)
 
206

 
(14
)
 
351

 
(17
)
Asset-backed securities
—

 
—

 
16

 
—

 
16

 
—

Corporate debt securities
209

 
(3
)
 
141

 
(9
)
 
350

 
(12
)
Total debt securities
$
697

 
$
(7
)
 
$
1,064

 
$
(44
)
 
$
1,761

 
$
(51
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2013
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and other U.S.
government corporations
and agencies:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury and agency
obligations
$
231

 
$
(6
)
 
$
5

 
$
—

 
$
236

 
$
(6
)
Mortgage-backed
securities
1,076

 
(47
)
 
21

 
(1
)
 
1,097

 
(48
)
Tax-exempt municipal
securities
693

 
(28
)
 
57

 
(5
)
 
750

 
(33
)
Mortgage-backed securities:
 
 
 
 
 
 
 
 
 
 
 
Residential
6

 
—

 
1

 
—

 
7

 
—

Commercial
270

 
(8
)
 
40

 
(1
)
 
310

 
(9
)
Asset-backed securities
35

 
(1
)
 
—

 
—

 
35

 
(1
)
Corporate debt securities
594

 
(28
)
 
17

 
(2
)
 
611

 
(30
)
Total debt securities
$
2,905

 
$
(118
)
 
$
141

 
$
(9
)
 
$
3,046

 
$
(127
)

Approximately 96% of our debt securities were investment-grade quality, with a weighted average credit rating of AA- by S&P at September 30, 2014. Most of the debt securities that were below investment-grade were rated BB, the higher end of the below investment-grade rating scale. At September 30, 2014, 5% of our tax-exempt municipal securities were pre-refunded, generally with U.S. government and agency securities. Tax-exempt municipal securities that were not pre-refunded were diversified among general obligation bonds of U.S. states and local municipalities as well as special revenue bonds. General obligation bonds, which are backed by the taxing power and full faith of the issuer, accounted for 39% of the tax-exempt municipals that were not pre-refunded in the portfolio. Special revenue bonds, issued by a municipality to finance a specific public works project such as utilities, water and sewer, transportation, or education, and supported by the revenues of that project, accounted for the remaining 61% of these municipals. Our general obligation bonds are diversified across the United States with no individual state exceeding 11%. In addition, 16% of our tax-exempt securities were insured by bond insurers and had an equivalent weighted average S&P credit rating of AA exclusive of the bond insurers’ guarantee. Our investment policy limits investments in a single issuer and requires diversification among various asset types.
The recoverability of our non-agency residential and commercial mortgage-backed securities is supported by factors such as seniority, underlying collateral characteristics and credit enhancements. These residential and commercial mortgage-backed securities at September 30, 2014 primarily were composed of senior tranches having high credit support, with over 99% of the collateral consisting of prime loans. The weighted average credit rating of all commercial mortgage-backed securities was AA at September 30, 2014.
The percentage of corporate securities associated with the financial services industry was 20% at September 30, 2014 and 23% at December 31, 2013.
All issuers of securities we own that were trading at an unrealized loss at September 30, 2014 remain current on all contractual payments. After taking into account these and other factors previously described, we believe these unrealized losses primarily were caused by an increase in market interest rates since the time the securities were purchased. At September 30, 2014, we did not intend to sell the securities with an unrealized loss position in accumulated other comprehensive income, and it is not likely that we will be required to sell these securities before recovery of their amortized cost basis. As a result, we believe that the securities with an unrealized loss were not other-than-temporarily impaired at September 30, 2014.
The detail of realized gains (losses) related to investment securities and included within investment income was as follows for the three and nine months ended September 30, 2014 and 2013:
 
Three months ended
September 30,
 
Nine months ended
September 30,
 
2014
 
2013
 
2014
 
2013
 
(in millions)
Gross realized gains
$
7

 
$
7

 
$
14

 
$
24

Gross realized losses
(1
)
 
(3
)
 
(5
)
 
(10
)
Net realized capital gains
$
6

 
$
4


$
9


$
14


There were no material other-than-temporary impairments for the three and nine months ended September 30, 2014 or 2013.
The contractual maturities of debt securities available for sale at September 30, 2014, regardless of their balance sheet classification, are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
Amortized
Cost
 
Fair
Value
 
(in millions)
Due within one year
$
1,030

 
$
1,036

Due after one year through five years
2,119

 
2,234

Due after five years through ten years
2,184

 
2,307

Due after ten years
1,950

 
2,134

Mortgage and asset-backed securities
2,300

 
2,324

Total debt securities
$
9,583

 
$
10,035